There are a few things you should know prior to buying your first home. These tips will help you make the changes needed in your financial life to avoid pitfalls that could haunt you down the road. While some of these steps are completed outside the relationship you have with your real estate agent, don’t forget that your agent has a lot of connections and experience with the entire home buying process. So, reach out whenever you need a recommendation or advice.
Don’t Put Off Financial Planning
Start a savings plan and pay down debt.
When saving for a house, it’s tempting to take money out of your retirement fund. However, you should consider that a last resort. Instead, look at your credit score to identify opportunities to improve it. Focus on paying off high-interest credit cards that can weigh down your scores.
If you have a student loan debt at a low-interest rate, you may want to prioritize paying on time but putting extra money you have toward the down payment and closing expenses.
Shop Around for the Best Mortgage Terms
Get the low-down on how mortgages work on the official site for the FTC. The site includes great strategies for improving your credit score, too.
Here are some tips for finding the best mortgage terms:
- Find out the PITI. Principal, interest, taxes, insurance (PITI) is the total cost of the mortgage. Some mortgages include them in the monthly payment and others do not.
- Questions to ask:
- How much is the origination fee? This is how much the lender charges to process the loan. It’s represented as a percentage of the loan amount. (The lower, the better!)
- How much is the down payment?
- When can I lock in an interest rate (for variable rate loans)?
- How long does the loan processing take?
- Get quotes from several lenders and be sure to compare the offers carefully.
Don’t Skip the Inspection, Even for New Builds
Inspections can cost $300 or more, depending on where you live. However, it’s important not to skip the inspection. Even if you are moving into a newer home, it’s important to understand if there are any electrical, plumbing or structural issues that will lead to expensive repairs down the road.
Budget for transitional costs
Will you have transitional costs such as rent payments or expenses such as buying new furniture? Try to save at least 10% of your total loan payment for unexpected purchases and as a buffer as you transition from your current living situation into a new home.
Your Real Estate Agent Is Happy to Help
Remember that your real agent is here to help. Please reach out to us if you should have any questions at all about the mortgage process or anything else regarding the home buying experience.